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In a shareholder-friendly measure, GATX Corporation (GATX - Free Report) announced a hike in its dividend payout and approved a new share buyback program. This strategic move is reflective of the company’s intention to utilize free cash for enhancing shareholders’ returns.
Notably, the company raised its quarterly dividend by 4.5% to 46 cents per share ($1.84 annually). This new dividend, approved by the company’s board of directors, will be paid on Mar 31, 2019 to stockholders of record as of Mar 4. The dividend yield based on this latest payout and the Jan 25 closing market price is approximately 2.5%. Additionally, the company’s board members cleared a new share repurchase authorization of $300 million in replacement of the previous one.
GATX has a track record of consistent dividend payments since its inception in 1919. Apart from the recent dividend hike, the company increased its quarterly dividend by 5% to 44 cents per share last January. Moreover, it returned $1.3 billion to shareholders through dividends and share buybacks in the last 10 years.
In recent days, companies like J.B. Hunt Transport Services (JBHT - Free Report) and Alaska Air Group (ALK - Free Report) in the broader Transportation sector also raised the respective dividend payouts. The successive dividend hikes in the sector can be attributed to the current tax law, which boosts cash flow owing to huge tax savings. With an increased cash flow, companies are frequently engaging in shareholder-friendly activities among other things.
As investors prefer an income generating stock, a high dividend yielding one is much coveted. Needless to say, that investors are always on the lookout for companies, which boast a track record of regular and incremental dividend payments.
Zacks Rank & Key Pick
GATX carries a Zacks Rank #3 (Hold). A better-ranked stock in the broader transportation sector is Spirit Airlines (SAVE - Free Report) , sporting a Zacks Rank #1 (Strong Buy).
Spirit Airlines has an expected EPS growth rate (three to five years) of 27.3%.
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